Israeli troops exchange fire with Palestinians trapped in Bethlehem's Church of the Nativity

Thousands gather in Washington for a mass rally in support of Israel

But chief Palestinian negotiator Saeb Erekat said Mr Sharon was defying the United States and the international community by not withdrawing immediately.

The US State Department said Secretary of State Colin Powell, on a peace mission to the region, would meet Mr Sharon on Tuesday and the Palestinian leader the following day.

Barghouti captured

The Israeli army said an elite unit arrested Mr Barghouti at a house in northern Ramallah.

Mr Barghouti escaped a previous attack

The 42-year-old Fatah leader had been sought by Israel since it began its so-called Operation Defensive Shield and had reportedly spent most of the past two weeks hiding in nearby villages.

Israel radio said Mr Barghouti surrendered without a fight.

Palestinian West Bank Security Chief Jibril Rajoub warned that if Israel harmed Mr Barghouti it would face "catastrophes... and expand the circle of violence".

The Israeli leader said Mr Barghouti's arrest in Ramallah showed the importance of continuing Israel's military campaign.

"Just imagine if we had withdrawn one day earlier and he would have been free and he'd be able to continue," he said.

The Israelis blame Mr Barghouti for much of the violence in the intifada, including suicide bombings.

Mr Barghouti denies the accusations.

Conference 'without Arafat'

Mr Sharon said peace with the Palestinian leader was not possible and that the United States had said Mr Arafat should no longer lead the Palestinian people.

The Israeli prime minister has isolated Mr Arafat in his offices in Ramallah since the Israeli army launched its offensive on the West Bank on 29 March following a spate of Palestinian suicide attacks against Israeli targets.

Mr Sharon's comments came after Mr Powell raised the possibility of a Middle East peace conference being held without Mr Arafat's involvement.

The secretary of state spoke on returning to Israel after visiting Lebanon and Syria in an attempt to calm the tension on Israel's northern borders.